[Federal Register Volume 76, Number 242 (Friday, December 16, 2011)]
[Rules and Regulations]
[Pages 78093-78095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32301]



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 Rules and Regulations
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  Federal Register / Vol. 76, No. 242 / Friday, December 16, 2011 / 
Rules and Regulations  

[[Page 78093]]



FEDERAL RETIREMENT THRIFT INVESTMENT BOARD

5 CFR Parts 1605 and 1653


Correction of Administrative Errors; Court Orders and Legal 
Processes Affecting Thrift Savings Plan Accounts

AGENCY: Federal Retirement Thrift Investment Board

ACTION: Interim final rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The Federal Retirement Thrift Investment Board (Agency) is 
issuing an interim final rule to amend its regulations governing back 
pay awards and retirement benefits court orders. This rule clarifies 
that the regulations governing a participant's options for electing 
makeup contributions when he or she receives a back pay award or other 
retroactive pay adjustment apply when the back pay award or other 
retroactive pay adjustment is for a period during which the participant 
was not appointed to a position that is covered by FERS, CSRS, or an 
equivalent system under which TSP participation is authorized.
    This rule also clarifies that an attorney is not a permissible 
payee for a retirement benefits court order or legal process affecting 
the Thrift Savings Plan and ensures that the date used to compute 
earnings on a court-ordered distribution amount is the same as the date 
used to compute the payee's entitlement.

DATES: This interim final rule is effective December 16, 2011. Comments 
should be received on or before January 17, 2012.

ADDRESSES: You may submit comments using one of the following methods:
     Mail: Office of General Counsel, Attn: Thomas Emswiler, 
Federal Retirement Thrift Investment Board, 1250 H Street NW., 
Washington, DC 20005.
     Hand Delivery/Courier: The address for sending comments by 
hand delivery or courier is the same as that for submitting comments by 
mail.
     Facsimile: Comments may be submitted by facsimile at (202) 
942-1676.
    The most helpful comments explain the reason for any recommended 
change and include data, information, and the authority that supports 
the recommended change.

FOR FURTHER INFORMATION CONTACT: Laurissa Stokes at (202) 942-1645.

SUPPLEMENTARY INFORMATION: The Agency administers the Thrift Savings 
Plan (TSP), which was established by the Federal Employees' Retirement 
System Act of 1986 (FERSA), Public Law 99-335, 100 Stat. 514. The TSP 
provisions of FERSA are codified, as amended, largely at 5 U.S.C. 8351 
and 8401-79. The TSP is a tax-deferred retirement savings plan for 
Federal civilian employees and members of the uniformed services. The 
TSP is similar to cash or deferred arrangements established for 
private-sector employees under section 401(k) of the Internal Revenue 
Code (26 U.S.C. 401(k)).

Back Pay Awards and Other Retroactive Pay Adjustments

    Section 1605.13 of the Agency's regulations (5 CFR 1605.13) governs 
a participant's options for electing makeup contributions when he or 
she receives a back pay award or other retroactive pay adjustment. 
Paragraph (a) of section 1605.13 governs situations in which a 
participant was separated from Government service and subsequently 
reinstated. This interim final rule clarifies that paragraph (a) of 
section 1605.13 also governs situations in which an individual was not 
appointed to a position that is covered by FERS, CSRS, or an equivalent 
system under which TSP participation is authorized and was subsequently 
appointed to such position.
    This rule also changes each occurrence of the term ``Government 
employment'' in section 1605.13 to the term ``Government service.'' 
This revision is non-substantive. It is intended to make the 
terminology in section 1605.13 consistent with the terminology in 
section 1690.1 of the Agency's regulations.

Retirement Benefits Court Order Payments to Attorneys

    Section 1653.5 of the Agency's regulations (5 CFR 1653.5) contains 
the Agency's procedures for making retirement benefits court order 
payments. Paragraph (g) of section 1653.5 provides that the TSP will 
honor an order that awards multiple payees. It further provides that if 
the order does not specify an order of precedence for the payments, the 
TSP will pay a current or former spouse first, a dependent second, and 
an attorney third.
    However, in 2004 the Agency amended Part 1653 to remove language 
that permitted an attorney to receive a payment pursuant to a 
retirement benefits court order. See 69 FR 18294 (April 7, 2004). The 
Agency determined that ``the security of a participant's immediate 
family is better preserved by conforming the TSP to the private sector 
practice of limiting court order payees to the participant's immediate 
family members, not by making tax-deferred retirement savings available 
for the payment of legal fees.'' Id. Accordingly, this interim final 
rule removes the residual reference to attorneys in section 1653.5(g). 
It also amends an incorrect citation in paragraph (a) of section 
1653.11.

Calculating Earnings on Court-Ordered Amounts

    Section 1653.4 of the Agency's regulations (5 CFR 1653.4) provides 
that a payee's entitlement under a retirement benefits court order will 
be credited with TSP investment earnings only if the court order 
expressly provides for earnings. Paragraphs (b) and (c) of section 
1653.4 provide the date on which a payee's court-ordered award amount 
is calculated. If the court order awards a percentage or fraction of an 
account as of a specific date, the payee's entitlement is calculated 
based on the account balance as of that date. 5 CFR 1653.4(b). If the 
court order awards a percentage or fraction of an account but does not 
contain a specific date as of which to apply that percentage or 
fraction, the payee's entitlement is calculated based on the account 
balance as of the effective date of the court order. 5 CFR 1653.4(c).
    Subparagraph (f)(3) of section 1653.4 describes how the TSP credits 
a payee's entitlement with investment earnings

[[Page 78094]]

when a court order awards earnings. If the court order does not specify 
an annual percentage rate or a per diem dollar amount to be added to 
the payee's entitlement, the TSP must calculate the earnings amount to 
be awarded by: (i) Determining the payee's award amount (e.g., the 
percentage or fraction of the participant's account); (ii) Determining, 
based on the participant's investment allocation as of the effective 
date of the court order, the number and composition of shares that the 
court-ordered award amount would have purchased as of the effective 
date; and (iii) Multiplying the price per share as of the payment date 
by that number and composition of shares. 5 CFR 1653.4(f)(3).
    Determining the number and composition of shares as of the 
effective date of the court order, and not a later date, protects the 
payee from investment decisions made by the participant after the 
effective date of the court order. However, it fails to protect the 
payee from investment decisions made by the participant when the date 
used to calculate the payee's entitlement under section 1653.4(b) is 
earlier than the effective date of the court order. When the date used 
to calculate the payee's entitlement under section 1653.4(b) is earlier 
than the effective date of the court order, the current regulatory 
language appears to permit the TSP record keeper to either (1) reject 
the court order because it purports to require the TSP to calculate 
earnings in a manner that is inconsistent with its regulations, or (2) 
calculate the payee's entitlement amount using the date specified in 
the court order and calculate the amount of any earnings on that 
entitlement using the later effective date of the court order. The 
latter approach would result in a period of time between the date 
specified in the court order and the effective date of the court order 
during which the payee's entitlement may be affected by investment 
decisions made by the participant. This interim final rule remedies 
this shortcoming by replacing the references in 5 CFR 1653.4(f)(3)(ii) 
to ``the effective date of the court order'' with ``the date used to 
calculate the entitlement.'' It also amends section 1653.2(b) to 
provide that a retirement benefits court order is not qualifying if it 
requires the TSP to calculate the payee's entitlement or earnings in a 
manner that is inconsistent with section 1653.4.
    This interim final rule ensures that the date used to compute 
earnings on a court-ordered distribution amount will always be the same 
as the date used to compute the payee's entitlement. It also makes it 
clear that a court order that provides otherwise will be rejected as a 
non-qualifying court order.

Interim Final Rule and Request for Comments

    Under section 553(b) of the Administrative Procedure Act (APA) (5 
U.S.C. 551 et seq.) a general notice of proposed rulemaking is not 
required when an agency, for good cause, finds that notice and public 
comment thereon are impracticable, unnecessary, or contrary to the 
public interest. The Agency has determined that the revisions to 
sections 1605.13, regarding back pay awards, and 1653.4, regarding 
payments to attorneys, do not require prior notice and public comment 
because they merely clarify currently existing rules.
    The Agency receives many retirement benefits court orders that 
award earnings to the payee as of a specified date which is earlier 
than the effective date of the court order. Under the Agency's 
regulations as they are currently written, it is unclear to the public 
whether the Agency will reject those court orders because they are non-
qualifying, process them pursuant to the language of the court order, 
or process them by calculating earnings as of the effective date of the 
court order. Immediate guidance on this matter is necessary to ensure 
that individuals who draft retirement benefits court orders can do so 
without uncertainty regarding the consequences of the court order's 
language.
    The Agency encourages public comments on this interim final rule. 
The Agency will consider post-effective public comments, will modify 
the rule in light of those comments, and will then adopt a final rule.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities. This regulation will 
affect Federal employees and members of the uniformed services who 
participate in the Thrift Savings Plan, which is a Federal defined 
contribution retirement savings plan created under the Federal 
Employees' Retirement System Act of 1986 (FERSA), Public Law 99-335, 
100 Stat. 514, and which is administered by the Agency. It will also 
affect individuals who receive a back pay award or other retroactive 
pay adjustment in connection with a Federal agency's failure to appoint 
that individual to a position that is covered by FERS, CSRS, or an 
equivalent system under which TSP participation is authorized. It will 
also affect spouses, former spouses, children, or dependents of TSP 
participants who become entitled to a portion of the participant's 
account pursuant to a qualifying retirement benefits court order.

Paperwork Reduction Act

    I certify that these regulations do not require additional 
reporting under the criteria of the Paperwork Reduction Act.

Unfunded Mandates Reform Act of 1995

    Pursuant to the Unfunded Mandates Reform Act of 1995, 2 U.S.C. 602, 
632, 653, 1501-1571, the effects of this regulation on state, local, 
and tribal governments and the private sector have been assessed. This 
regulation will not compel the expenditure in any one year of $100 
million or more by state, local, and tribal governments, in the 
aggregate, or by the private sector. Therefore, a statement under Sec.  
1532 is not required.

Submission to Congress and the General Accounting Office

    Pursuant to 5 U.S.C. 810(a)(1)(A), the Agency submitted a report 
containing this rule and other required information to the U.S. Senate, 
the U.S. House of Representatives, and the Comptroller General of the 
United States before publication of this rule in the Federal Register. 
This rule is not a major rule as defined at 5 U.S.C. 804(2).

List of Subjects

5 CFR Part 1605

    Claims, Government employees, Pensions, Retirement.

5 CFR Part 1653

    Alimony, Child support, Claims, Government employees, Pensions, 
Retirement.

Gregory T. Long,
Executive Director, Federal Retirement Thrift Investment Board.

    For the reasons stated in the preamble, the Agency amends 5 CFR 
chapter VI as follows:

PART 1605--CORRECTION OF ADMINISTRATIVE ERRORS

0
1. Revise the authority citation for part 1605 to read as follows:

    Authority:  5 U.S.C. 8351, 8432a, and 8474(b)(5) and (c)(1). 
Subpart B also issued under section 1043(b) of Public Law 104-106, 
110 Stat. 186 and sec. 7202(m)(2) of Public Law 101-508, 104 Stat. 
1388.


0
2. Amend Sec.  1605.13 by revising paragraphs (a) introductory text, 
(a)(1) and (2), (b) introductory text, and the first sentence of 
paragraph (d) to read as follows:

[[Page 78095]]

Sec.  1605.13  Back pay awards and other retroactive pay adjustments.

    (a) Participant not employed. The following rules apply to 
participants who receive a back pay award or other retroactive pay 
adjustment for a period during which the participant was separated from 
Government service or was not appointed to a position that is covered 
by FERS, CSRS, or an equivalent system under which TSP participation is 
authorized:
    (1) If the participant is reinstated or retroactively appointed to 
a position that is covered by FERS, CSRS, or an equivalent system under 
which TSP participation is authorized, immediately upon reinstatement 
or retroactive appointment the employing agency must give the 
participant the opportunity to submit a contribution election to make 
current contributions. The contribution election will be effective as 
soon as administratively feasible, but no later than the first day of 
the first full pay period after it is received.
    (2) The employing agency must give a reinstated or retroactively 
appointed participant the following options for electing makeup 
contributions:
    (i) The reinstated or retroactively appointed participant may 
submit a new contribution election for purposes of makeup contributions 
if he or she would have been eligible to make such an election but for 
the erroneous separation or erroneous failure to appoint; or
    (ii) If a reinstated participant had a contribution election on 
file when he or she separated, the contribution election the 
participant had on file when he or she separated may be reinstated for 
purposes of makeup contributions.
* * * * *
    (b) Participant employed. The following rules apply to participants 
who receive a back pay award or other retroactive pay adjustment for a 
period during which the participant was employed in a position that is 
covered by FERS, CSRS, or an equivalent system under which TSP 
participation is authorized:
* * * * *
    (d) Prior withdrawal of TSP account. If a participant has withdrawn 
his or her TSP account other than by purchasing an annuity, and the 
separation from Government service upon which the withdrawal was based 
is reversed, resulting in reinstatement of the participant without a 
break in service, the participant will have the option to restore the 
amount withdrawn to his or her TSP account.* * *
* * * * *

PART 1653--COURT ORDERS AND LEGAL PROCESSES AFFECTING THRIFT 
SAVINGS PLAN ACCOUNTS

0
3. The authority citation for part 1653 continues to read as follows:

    Authority:  5 U.S.C. 8435, 8436(b), 8437(e), 8439(a)(3), 8467, 
8474(b)(5) and 8474(c)(1).

0
4. Amend Sec.  1653.2 by adding paragraph (b)(6) to read as follows:


Sec.  1653.2  Qualifying retirement benefits court orders.

* * * * *
    (b) * * *
    (6) An order that requires the TSP to calculate the payee's 
entitlement or earnings in a manner that is inconsistent with Sec.  
1653.4 of this part.

0
5. Amend Sec.  1653.4 by revising paragraph (f)(3)(ii) to read as 
follows:


Sec.  1653.4  Calculating entitlements.

* * * * *
    (f) * * *
    (3) * * *
    (ii) Determining, based on the participant's investment allocation 
as of the date used to calculate the entitlement, the number and 
composition of shares that the payee's award amount would have 
purchased as of the date used to calculate the entitlement.
* * * * *

0
6. Amend Sec.  1653.5 by revising paragraph (g)(2) to read as follows:


Sec.  1653.5  Payment.

* * * * *
    (g) * * *
    (2) If the order does not specify an order of precedence for the 
payments, the TSP will pay a current or former spouse first and a 
dependent second.
* * * * *

0
7. Amend 1653.11 by revising paragraph (a) to read as follows:


Sec.  1653.11  Definitions.

    (a) Definitions generally applicable to the Thrift Savings Plan are 
set forth at 5 CFR 1690.1.
* * * * *
[FR Doc. 2011-32301 Filed 12-15-11; 8:45 am]
BILLING CODE 6760-01-P